OPAP - Caution following ‘encouraging’ recovery
OPAP’s Q220 results were heavily affected by the COVID-19 closures, with a revenue (GGR) decline of 53.2%. As expected, costs were well managed so that EBITDA profitability was restored by the end of the period and free cash flow generation improved on a relative basis. Post lockdown, the overall recovery was described as ‘encouraging’, but management reiterates a cautious outlook for the rest of the year given the macroeconomic uncertainties and re-emergence of COVID-19 in parts of the country. We make small changes to our assumptions, which result in similar EBITDA for FY20 to before and a modest downgrade of 3% in FY21. Our DCF continues to suggest a value of at least €9.5/share.OPAP is engaged in the operating and management of numerical lottery and sports betting games as well as lottery games. Co. holds concession to operate and manage new sports betting games in Greece as well as a right of first refusal to operate and manage any new lottery games permitted by the Hellenic Republic. Co. operates six numerical lottery games, including Joker, Lotto, Proto, Extra 5, Super 3, and Kino; and three sports betting games consisting of Stihima, Propo, and Propo-goal. Co. is also engaged in designing new lottery games, including Bingo and Super 4. Co. distributes its games through an extensive on-line network of agents.
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